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China’s trade surplus narrows, Europe called lower

China’s trade surplus in May was $24.92 billion, and that compared with the consensus estimate of $31.9 billion. 

Imports jumped by 26%, while economists were expecting an increase of 18.7%. Exports rose by 12.6%, and traders were anticipating a jump of 10%. 

These figures come at a crucial time as the US and China are locked in trade negotiations. This week Beijing offered to buy $70 billion worth of US goods in exchange for no additional tariffs on Chinese goods. On Wednesday the US trade deficit fell to a seven month low as exports hit a record level. President Trump is keen to rebalance the trading relationship between the US and China, as he feels that China have had to too easy for too long.

The US tech sector had a great run this week, but the NASDAQ finished lower last night. Facebook lost ground after the company confirmed a glitch caused 14 million users to share posts publicly, when they should have been kept private. The social media giant lost users during the Cambridge Analytica scandal, and an incident like this could dent the firm’s reputation even further.

The euro enjoyed a positive run in the past two sessions. The single currency received a boost on Wednesday when two European Central Bank (ECB) policymakers issued hawkish statements. Peter Praet believes earnings will rise and that will push up the inflation rate toward the ECB’s target. When discussing the stimulus package, Jens Weidmann confirmed that it is ‘plausible’ the bond buying scheme will come to an end this year. The double whammy of hawkish remarks has helped the euro. Continental equity markets drifted lower yesterday, and the firmer euro is likely to have played a role in the negative move.

In the first-quarter, the eurozone grew by 0.4%, it weakest quarterly reading since 2016. This week we saw the services PMI report fall for a fourth consecutive month. The eurozone is going through an economic soft patch, so it seems strange that Mr Weidmann is even contemplating winding down the monetary easing programme.

The G7 meeting starts today in Quebec. Traders will be paying attention to see if any progress is made regarding trade talks. President Tump is in the eye of the trade storm, and he is letting the world know he means business, and he is determined to get the best deal for the US. At the moment, investors aren’t overly concerned about the state of play, but that doesn’t mean they don’t have a pain threshold.

EUR/USD – has been pushing higher for over a week, and if 1.1830 is cleared, it might pave the way for 1.2000 to be tested. Support might be found at 1.1700, and a break below it might bring 1.1617 into play.

GBP/USD – is continuing its bounce back, and if it moves above 1.3450, it could target 1.3590 – the 200-day moving average. A move lower might encounter support at 1.3300, and a break below it might put 1.3204 on the radar. 

EUR/GBP – has been broadly moving higher since April, and if it clears 0.8840 – 200-day moving average, it might target 0.8900. Beyond that, bulls might look to 0.8970. Support might be found at 0.8725.

USD/JPY – has been in an upward trend since mid-March, and if it can clear 110.17 – 200-day moving average, it might target 111.39. Support might be found at 108.78 – 50-day moving average. 

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